Rating agency predicts India-EU trade pact will boost manufacturing and foreign investment, marking a credit-positive move.
A major rating agency has described the recently concluded free trade agreement between India and the European Union as a credit-positive development. The agency suggests that the reduction in trade barriers and enhanced market entry will attract substantial international capital, stimulate domestic production, and improve the global standing of India’s labour-intensive industries.
Announced on 28 January 2026, the pact, frequently termed the “mother of all deals” grants approximately 93 per cent of Indian exports duty-free access to the 27-member European bloc. This historic agreement, which took nearly two decades to finalise, establishes a unified marketplace serving roughly two billion people, connecting the world’s fourth-largest economy with its second-largest economic union.
The agreement is expected to significantly lower operational costs:
- Indian Exports: The European Union will abolish duties on diverse goods including textiles, footwear, chemicals, and gems. Average European tariffs on Indian products will plummet from roughly 3.8 per cent to a mere 0.1 per cent.
- European Imports: India will gradually reduce import taxes on premium vehicles from 110 per cent to 10 per cent for a specific annual quota. Commodities such as olive oil, spirits, and processed foods will also see reduced prices over a ten-year liberalisation period.
While the deal offers immediate competitive advantages, the rating agency noted that the full scope of these benefits will depend on India’s ability to further simplify regulations and improve the general business climate. Although increased competition may challenge local manufacturers, particularly in the automotive sector, the overall influx of foreign investment is expected to underpin long-term manufacturing growth.
SOURCE – BUSINESS STANDARD
